Saipem (MIL:SPM) is one of the world's leading engineering and construction companies in the oil and gas sector. It is present in the refining, petrochemicals, gas liquefaction, development of marine deposits and drilling sectors, among others.
The company has taken advantage of the crisis in the sector to restructure and simplify its internal structure, reducing costs, improving margins and placing it in a good position for the recovery that is taking place in the oil and gas industry. In addition, the capital increase car-ried out in 2016 has allowed it to substantially reduce its debt, giving rise to a healthy balance sheet structure with which to face the growing number of projects that its clients want to carry out in the coming years. Its manage-ment team is focused on the generation of value and as an example of this they have decided to focus on those businesses in which Saipem is stronger, thinking about valuing those that are not strategic, such as drilling.
In our standard scenario, Saipem is trading at 7x ear-nings, with a return on capital similar to that of its com-petitors and a very attractive upside potential.
From Francisco Garcia Parames (Trades, Portfolio)' first-quarter portfolios commentary.
